econ final

A tax cut or government spending increase intended to shift aggregate demand to the right is known as:

. Fiscal stimulus

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1 divided by the required reserve ratio

When an individual deposits cash or coins in a transactions account, there is:

A change in the composition of the money supply, but not the size

Using Figure 11.3 (the link below), if the equilibrium price level is P1 then aggregate supply is:

AS1 and the equilibrium output level is Q2

The total quantity of output demanded at alternative price levels refers to

Aggregate demand

The various quantities of output that all market participants are willing and able to buy at alternative price levels in a given time period is:

Aggregate demand

According to Keynes, which of the following is always true at macro equilibrium?

Aggregate demand equals aggregate supply

Which of the following is likely to occur if people reduce their spending because they are worried about an economic downturn, ceteris paribus?

Aggregate demand will decrease or shift to the left

Which of the following is likely to occur if the U.S. government increases spending on military weapons, ceteris paribus?

Aggregate demand will increase or shift to the right

The total amount of output producers are willing and able to produce at alternative price levels in a given time period is known as:

Aggregate supply

Which of the following is likely to occur if OPEC increases the amount of oil it supplies and domestic energy prices fall, ceteris paribus?

Aggregate supply will increase or shift to the right

In Figure 12.1 (the link below), assume aggregate demand is represented by AD3. Which of the following could cause a shift to AD2?

An increase in government spending on goods and services

Constraints on deposit creation include all of the following except:

An increase in the money multiplier.

The assets held by a bank to fulfill its deposit obligations are known as:

Bank reserves

The reserve ratio is equal to:

Bank reserves divided by total deposits

Money creation occurs when

Banks make loans to borrowers

Self-adjustment of markets is assumed in:

Classical economic theory

The four components of aggregate demand are

Consumption, investment, government spending and net exports

The basic money supply includes:

Currency, transactions accounts and traveler's checks

If the Fed sells more bonds to the public, then the money supply will:

Decrease and the aggregate demand curve will shift to the left.

Restrictive monetary policy will:

Decrease the lending capacity for banks

If the economy is experiencing inflation, which of the following is most likely to decrease aggregate demand?

Decreasing spending and raising taxes

The creation of transactions deposits by bank lending is the definition of:

Deposit creation

The different shapes of the aggregate supply curve:

Determine the impact of monetary policy on price level and output

Expansionary monetary policy will:

Encourage people to borrow more money

A bank may lend an amount equal to its

Excess reserves

U.S. monetary policy relies on the:

Federal Reserve System's control over the money supply

According to Keynes:

Government intervention in the economy is necessary at times

What fiscal policy tools are used to shift the aggregate demand curve?

Government spending and taxes

The basic money supply:

Includes currency and transactions accounts

When calculating aggregate demand, government expenditure:

Includes spending by federal, state, and local governments on goods and services.

Which of the following helps explain the multiplier effect?

Income is spent and respent in the circular flow model

Refer to Figure 14.1. Suppose the Federal Reserve buys bonds in the open market. The money supply will _______ and cause a shift from _______.

Increase; AD1 to AD2

Which of the following is not an essential characteristic of money?

It serves as a benchmark for barter

The 12 regional Fed banks do all of the following except:

Lend money to individuals

The intersection of the aggregate demand and supply curves definitely establishes

Macro equilibrium

Which of the following is not included in the study of macroeconomics?

Market structures

Total reserves minus required reserves.

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The use of money and credit controls to change macroeconomic activity is known as:

Monetary policy.

The purchase and sale of government bonds by the Fed for the purpose of altering bank reserves is referred to as:

Open-market operations

According to the text, which of the following is a determinant of macroeconomic performance?

Policy levers

Which of the following is an explanation of why the aggregate supply curve slopes upward, assuming the price level increases?

Production costs increase and producers charge higher prices for their goods

To increase the money supply the Fed can:

Reduce the reserve requirement, reduce the discount rate, or buy bonds.

The term fractional reserves refers to:

Reserves being a fraction of total deposits.

Which of the following is not part of M1 but is included in "near money" according to the text?

Savings accounts

With respect to the aggregate demand curve, a tax cut will

Shift the curve rightward

With respect to the aggregate demand curve, a tax cut will:

Shift the curve rightward

The discount rate is the interest rate charged by:

The Federal Reserve when it lends money to private banks

Ceteris paribus, which of the following will occur if the Fed buys bonds through open-market operations?

The aggregate demand curve should shift rightward.

Which of the following is not a reason for the downward slope of the aggregate demand curve?

The cost effect

The GDP gap is:

The difference between equilibrium output and full-employment output

The marginal propensity to consume is:

The fraction of each additional dollar of disposable income spent on consumption

The marginal propensity to save is:

The fraction of each additional dollar of disposable income that goes to saving

Which of the following is not a basic monetary policy tool used by the Fed?

The income tax rate

What is the total impact on aggregate demand because of a fiscal stimulus?

The initial injection plus all subsequent increases in consumer spending triggered by the stimulus

A change in the reserve requirement affects:

The money multiplier and excess reserves

The money multiplier represents

The number of deposit dollars the banking system can create from $1 of excess reserves

Which of the following is an example of the real balances effect, assuming the U.S. price level decreases?

The purchasing power of money increases and people buy more goods

Controversies between Keynesian, monetarist, supply-side, and eclectic theories focus on:

The shape and sensitivity of aggregate supply and aggregate demand curves

Excess reserves are calculated as:

Total reserves minus required reserves.